June 2017 CONTACTS Ivan Chung852-3758-1399 Associate Managing Director ivan.chung@moodys Li Ma86-21-2057-401 8MD-Corporate Finance mali@moodys Gary Lau852-3758-1377 MD-Corporate Finance gary.lau@moodys MARKET VIEWPOINT Bond Connect Likely to Attract More Investors to Onshore Market and Marginalize Offshore RMB Bond MarketBond Connect, the mutual bond market access scheme between Hong Kong and Mainland China, is expected to be effective in the second half of 2017 and should allow foreign investors to expand their investments in the onshore market more quickly. MARKET TREND Tightening Regulatory Environment Drives Issuance Trend5 Regulatory efforts to tighten supervision of financial institutions’ funding and investments in the bond markets have resulted in tighter liquidity and higher funding costs in the onshore market this year, which is dampening issuance growth. The higher funding costs will increase the refinancing risks of weaker credits. Repackaged Notes Backed by Local Government Bonds Raise Prospects for More Cross-Border IssuanceRecently, a number of bonds issued by various Chinese RLGs have been resold through US dollar- denominated repackaged notes issued by an offshore-incorporated special purpose vehicle. Repackaged notes provide an additional avenue through which dollar-based portfolio investors can access China&39;s interbank bond market. RMB DASHBOARD12 China - NPL Securitization: Heard from the Market: Lack of Special Servicers in China Spurs Junior Investors&39; Role in NPL ResolutionCLOs - China: China&39;s Developing CLO Sector Poses Vastly Different Credit Risks from US MarketBanks - China: Profitability Under Pressure; Capital and Liquidity Weaker Among Smaller BanksChina Credit Market: Tighter Corporate Bond Collateralization Rules Will Help Reduce Systemic Risks 21 Banks - China: City and Rural Commercial Banks Will Remain Active in Capital Raising in 2017 22 Marketplace Lending ABS - China and US: Different Lending Models Present Unique Credit Challenges and Strengths 24 MOODYS MARKET VIEWPOINT Bond Connect Likely to Attract More Investors to Onshore Market and Marginalize Offshore RMB Bond Market On 16 May 2017, the People’s Bank of China (PBOC) and the Hong Kong Monetary Authority (HKMA) jointly announced the establishment of mutual bond market access between Hong Kong and Mainland China (Bond Connect). Bond Connect, expected to be effective in the second half of 2017, will allow international investors to trade onshore RMB bonds in Hong Kong, thereby easing their access to the onshore bond market. Current arrangements for such investors – through the Qualified Foreign Institutional Investor (QFII) scheme, the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme and eligible institutions in the Mainland’s interbank bond market (PBOC scheme)– are more complicated in terms of trading, hedging and cross-border fund flows (Exhibit 1). Bond Connect is likely to therefore attract more investors and enable them to expand their investments in the onshore market more quickly. As Bond Connect transactions will be conducted via settlement accounts in Hong Kong, it will be more convenient for investors to move the invested funds across borders. Leveraging on the well-developed financial infrastructure in Hong Kong, the Bond Connect scheme with trading and settlement conducted by the HKMA’s Central Moneymarkets Unit (CMU) should improve operational efficiency. We expect its implementation to help diffuse international practices and standards to the domestic market. The Bond Connect scheme is another milestone in the opening up of China’s financial markets, following the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect schemes. Bond Connect aims to offer a well-developed financial infrastructure with international legal and regulatory standards. The first phase of Bond Connect will begin with northbound trading, which will allow overseas investors to invest in the China Interbank Bond Market (CIBM). 214 June 2017Renminbi Bonds Monitor: June 2017 Exhibit 1 The Bond Connect Scheme shares same scope of eligible investors as the PBOC scheme Source: HKEX, HKMA, PBOC, CSRC, SAFE, Moody&39;s Investors Service China has opened the onshore market to international investors since the RMB was added into the IMF&39;s Special Drawing Rights basket in late 2015(Exhibit 2). However, foreign participation in the onshore bond market is still low. As of 31 March 2017, offshore investors only held approximately RMB830.2 billion of onshore bonds,1.25% of total outstanding onshore bonds based on published data from PBOC. While Bond Connect will provide more efficient access for international investors, we believe investors and sovereigns will increase their asset allocation of RMB bonds gradually. Inclusion of Chinese onshore bonds in key global bond indices will be a key impetus for them to increase asset allocation in RMB bonds. Finally, Bond Connect will allow international investors to trade onshore bonds and move their funds in Hong Kong. Thus, the offshore RMB bond market’s niches in terms of trading and mobility of funds will diminish, further marginalizing the market given its much smaller scale and market liquidity. In this regard, investors are more likely to invest onshore than offshore because of the much larger scale, diversity and secondary market liquidity in the onshore market. 314 June 2017Renminbi Bonds Monitor: June 2017 Exhibit 2 Chinese Government Opens up the Onshore Market Announcement: RMB will be included into SDR Basket Announcement: Bond Connect will be launched Nov 2015May 2017 Feb 2016Jun 2016Aug 2016Dec 2016 Relax QFII investment quota limit and shorten lock-up period Foreign-funded and JV PE fund management agencies may register as PE fund managers Relax RQFII investment quota limit Launch Shenzhen- Hong Kong Stock Connect Launch PBOC Scheme Cancel total investment quota limit for Shanghai-Hong Kong Stock Connect RMB officially joined SDR basket Feb 2016Aug 2016Oct 2016 Sources: IMF, SAFE, PBOC, ChinaBond, AMAC, CSRC, SSE, HKEX, HKMA, Moody&39;s Investors Service 414 June 2017Renminbi Bonds Monitor: June 2017
。。。以上简介无排版格式，详细内容请下载查看